Judge throws out watchdog’s case against Finder: A ‘win for crypto,’ founder says

The Australian crypto industry notched up a win this week when a judge dismissed a market watchdog’s case against comparison site Finder.

The Federal Court of Australia dismissing a regulator’s case marks the first instance where an Australian court examined the legal definition of a debenture in the context of cryptocurrencies, Finder co-founder Fred Schebesta told DL News.

“It’s a landmark case where crypto is seen as a legitimate and compliant industry that takes compliance and the law seriously and into account,” Schebesta said. “This is a win for crypto and demonstrates that innovation can thrive within a regulated environment.”

The dispute centred on whether the company’s “Finder Earn” product was considered a debenture following a lawsuit brought forth by the Australian Securities and Investments Commission in December, 2022.

A debenture is a type of debt instrument companies issue to borrow money from investors. It essentially promises to repay the borrowed money at a future date, often with interest.

“ASIC has not established that the Finder Earn product is a debenture within the meaning” of the law, Justice Brigitte Markovic wrote in a court document on Wednesday.

ASIC has also been ordered to pay Finder’s court fees and expenses.

Earn was offered between late February and November, 2022, through the comparison site’s “Finder Wallet,” a cryptocurrency exchange built within the company’s mobile app.

Wallet allows users to buy and sell Bitcoin and Ethereum, among other cryptocurrencies.

Wallet customers could deposit Australian dollars, which were then converted into the Australian dollar-pegged stablecoin, TrueAUD. That was then allocated to Earn in return for a yield of roughly 4% and, in some instances, up to 6%.

Following ASIC’s lawsuit, Finder sunset Earn in November, 2022, which saw the return of $500,000 in TrueAUD to affected customers.

The company said it has no plans to offer the product in the foreseeable future.

ASIC alleged Finder had failed to obtain an Australian Financial Services Licence to offer customers access to its Earn product, setting in motion the 15-month legal dispute.

Finder Wallet contended that the arrangement did not create a debt but rather a contractual promise to repay, arguing that the product was not a debenture, per the court document.

“It is apparent that there is no deposit or loan; rather, there is a purchase by the customer of an investment which is recoverable as a contractual right to a return, not as a right to repayment of a loan as a debt,” Justice Markovic wrote, siding with Finder.

In other words, the judge ruled that customers were not making deposits or loans with Finder Wallet’s product. They were investing with an agreement to get money back, and not as a traditional loan repayment.

Finder’s exchange sees “tens of thousands” in monthly active users out of roughly 70,000 registered accounts, a Finder spokesperson told DL News.

ASIC did not immediately return a request for comment.

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.